Small business optimism increased last month

Small business optimism improved at the end of last year as uncertainty eased and owners grew more confident about economic conditions heading into the new year, according to the National Federation of Independent Business..The NFIB Small Business Optimism Index increased 0.5 points in December to 99.5, higher than its 52-year average of 98. The increase was driven by a rise in the share of owners expecting better business conditions. At the same time, NFIB’s uncertainty index fell seven points to 84, an 18-month low.“2025 ended with a further increase in small business optimism,” NFIB Chief Economist Bill Dunkelberg said, noting owners expect more favorable conditions this year as cost pressures ease, labor challenges soften and capital investment picks up.Expectations for the economy improved notably in December, with a net 24 percent of owners expecting better business conditions, up nine points from November and the first increase since July. Assessments of current performance remained mixed. While 63 percent of owners rated the health of their business as excellent or good, actual sales continued to lag historical norms, and profit trends remained negative.Taxes were the top concern for small businesses, cited by 20 percent of owners as their No. 1 problem — the highest reading in more than 4 1/2 years. Labor quality followed closely, though concerns in that area eased slightly. Inflation pressures continued to moderate, with fewer owners raising prices and a declining share citing inflation as their primary business problem.Price pressures eased but remained higher than average. The share of owners raising selling prices fell in December, and fewer planned price increases in the near term. Even so, pricing activity remains well above long-term norms, indicating continued inflation. Compensation growth picked up modestly, reflecting continued competition for workers.Labor markets remained tight, though stable, according to the report. About one-third of owners reported job openings they could not fill, unchanged from November and still well above historical levels. Nearly all firms trying to hire said they found few or no qualified applicants. Plans to create new jobs dipped slightly but remained positive.Capital spending increased toward year-end, with more than half of owners reporting outlays in the past six months, especially for vehicles and facility improvements. However, plans for future capital investment remained historically weak, suggesting continued caution despite improving sentiment.Financial conditions improved as fewer owners reported difficulty obtaining credit or paying higher interest rates, and borrowing levels remained low by historical standards. Supply chain disruptions continued to affect nearly two-thirds of small businesses, though the severity of disruptions eased.